Experienced business leaders know the importance of strong business financials and use financial statements wisely to achieve business success. Financial statements record business financials and only proper accounting renders them reliable measures of financial health. As American investor and businessman Charlie Munger said, “You have to know accounting. It’s the language of practical business life.” Restaurant executive Tilman J. Fertitta stated, “Don’t ever let your business get ahead of the financial side of your business. Accounting, accounting, accounting. Know your numbers.”
What are Financial Statements?
Financial statements are the records and “measuring sticks” that enable strong business management. The three primary reports of business financials are:
The profit and loss (or income) statement. It captures all revenues, business expenses, and depreciation and it reports net income for the period measured.
The cash flow statement. This reports the money flowing into the business from sales, accounts receivable, and equity actions along with money flowing out of the business from operating expenses, income tax payments, employee expenses, interest payments, and payments to vendors and suppliers.
The balance sheet. This shows the assets owned by your business including bank accounts, property, equipment, and inventory. It shows the liabilities of the business including accounts payable, credit card payments, and business loans.
Why is it Important to Manage Business Financials?
A business may be built on a great idea. It may appear sound, but for a business to succeed, it must be financially sound. It must have a positive cash flow and earn more money than it spends. Financial statements are the culminating efforts of bookkeeping actions that track a company’s daily financial activities, and the reports help to identify all the areas that need correction or adjustment. Strong business financials enable an enterprise to secure financing such as business loans, or to attract investors.
Seek Experienced Financial Assistance
Contact Spearing Capital & Consulting based in Tampa, FL for the best in commercial financing consulting, customer service, and expert knowledge. Our number one priority is to get you the financing you need for your business.